Omidyar Network Report: We’re At A Tipping Point For Impact Investing
This post was originally produced for Forbes.
Omidyar Network, an impact investing pioneer, recently published a new report entitled “Frontier Capital” on impact investing. Given the attention that has been paid to the Chan Zuckerberg Initiative, which parallels the structure of the Omidyar Network in some respects–critically allowing for both impact investing and traditional philanthropy–I’ve taken time with Paula Goldman, a report author and Senior Director, Global Lead for Impact Investing at Omidyar Network to get her take on the report.
Goldman makes three key observations about impact investing for 2016:
We’re at a tipping point for impact investing
The next generation is more socially minded and will push for change
Capital and technology will drive innovation in emerging markets
Let’s take a look at each of these key issues through Goldman’s eyes.
She notes, “Interest in impact investing is at an all-time high with champions including the Pope and Bill Gates. However, to date, the amount of capital being deployed to impact investing is still relatively small – constituting less than 0.1% of total capital markets today. In 2016, we will see interest in impact investing convert into exponentially more action — taking a significant leap forward from an “unorthodox” idea to more mainstream.”
She explains the parallels between the founding of Omidyar Network and the Chan Zuckerberg Initiative to help make that case that impact assets will grow dramatically.
eBay and Omidyar Network founder Pierre Omidyar recognized early in his journey as a philanthropist that addressing big social challenges would require the use of multiple assets. His experience at eBay was that markets, in particular, are an incredible tool for positive social impact. As a result, in 2004 he created Omidyar Network as both a traditional foundation and an LLC so that he could invest in the right changemaker, regardless of whether it is a for-profit or nonprofit.
The recently announced Chan Zuckerberg Initiative is taking a similar hybrid approach in establishing an LLC that can make for-profit investments in addition to nonprofit grants. I expect others to follow suit in 2016 and beyond.
Goldman looks at the demographics of “NextGens” to drive much of that shift. She notes, “There are incredible demographic shifts underway, including the impending $41T wealth transfer to ‘NextGens.’ We’re also seeing more young investors really drive impact investing. The next generation of investors is more globally aware and connected, viewing investing in a fundamentally different way. 67% of Millennials see investment decisions as a way to express social, political, or environmental values versus only 36% of Baby Boomers – nearly twice as many.”
“For example, Millennial employees at BlackRock BLK -2.80% were a significant influence in the development of the company’s first impact investing fund. Major mainstream investment firms are responding to an increase in demand from Individual and institutional investors alike,” she adds.
Goldman sees emerging markets as a place where impact investing and technology will come together to lead innovation. She explains:
2016 will be the year where entrepreneurs and investors leverage the ubiquity of smartphone technology and demographic shifts to fuel the next wave of innovation and impact in emerging markets. We’ve identified a $3 trillion opportunity just above the base of the pyramid to achieve both financial returns and social impact — what we’ve called “frontier capital,” which is early stage risk capital in emerging markets directed towards businesses that serve those earning between $2 and $8 daily. These people have greater purchasing power and a steadier income than the very bottom of the pyramid, but still benefit greatly from products and services that improve their lives. Companies like Lenddo and MicroEnsure are leveraging technology to create socially impactful businesses that directly serve this population, enabling them to scale more effectively and serve the bottom of the pyramid without subsidy.
On Thursday, December 17, 2015 at noon Eastern, Goldman will join me here for a live discussion about the report and its implications for investing in 2016 and beyond. Tune in here then to watch the interview live. Post questions in the comments below or tweet questions before the interview to @devindthorpe.
More about Omidyar Network:
Omidyar Network is a philanthropic investment firm dedicated to harnessing the power of markets to create opportunity for people to improve their lives. Established in 2004 by eBay founder Pierre Omidyar and his wife Pam, the organization invests in and helps scale innovative organizations to catalyze economic and social change. Omidyar Network has committed US$879 million to for-profit companies and nonprofit organizations that foster economic advancement and encourage individual participation across multiple initiatives, including Consumer Internet & Mobile, Education, Financial Inclusion, Governance & Citizen Engagement, and Property Rights. To learn more, visit www.omidyar.com, and follow on Twitter @omidyarnetwork#PositiveReturns.
Paula Goldman, © 2011 Eric Millette, All Rights Reserved
Paula Goldman is an entrepreneur, anthropologist, and movement strategist. She leads Omidyar Network’s global efforts to accelerate the impact investing industry through a combination of investments, strategic partnerships, and thought leadership. She also acts as an advisor on advocacy and influence efforts across Omidyar Network investment initiatives. Paula has served on a number of industry advisory boards–including PEERS and the Harvard Business Review’s Insight Center on Scaling Social Impact—and is an inaugural Social Impact Fellow at UC Berkeley’s Haas School of Business. She also serves an advisor to a number of tech start-ups.
Born in Singapore, Paula has lived in eight countries across four continents. Paula came to Omidyar Network with extensive background in frontier markets enterprise, managing businesses ranging from an affordable private school in rural India to a micro-enterprise syndicate in post-war Bosnia. She has led innovations that harness the potential of technology, advocacy, and entertainment. As founder and director of Imagining Ourselves, a project of the International Museum of Women, she led the creation of one of the world’s first online museums, alongside a book, traveling exhibits, and series of global events with more than a million participants. This work was recognized with the 2007 Social Impact Award from the Anita Borg Institute for Women and Technology and a 2008 Muse Award from the American Association of Museums.
Paula earned a PhD from Harvard University, where she studied how unorthodox ideas become mainstream. She holds a masters in public affairs from Princeton and a BA with highest honors from UC Berkeley. She has been on faculty at both UC Berkeley and Mills college and contributes as an author to outlets such as the Financial Times, HBR.org, and Huffington Post.
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